Drop in petrol, diesel price gap to fuel buyers' shift towards petrol cars: ICRA

ICRA has said that the share of diesel vehicles has already reduced to 29% in 2019-20 from 58% in 2012-13, and it will further reduce to about 15-18%
...
China and the US, the world's top two automobile markets, have a negligible share of diesel vehicle in their overall car sales. (File photo used for representational purpose). (PTI)
China and the US, the world's top two automobile markets, have a negligible share of diesel vehicle in their overall car sales. (File photo used for representational purpose).

Declining price gap between petrol and diesel is likely to accelerate shift towards petrol and CNG cars in the domestic passenger vehicle (PV) segment in the coming years, rating agency ICRA said on Wednesday.

According to an analysis by ICRA, diesel PV's share is expected to decline to 15-18 per cent in 2021-22 from 29 per cent in 2019-20, the rating agency said in a statement.

Also check these Cars

Find more Cars
Mahindra Ekuv100 (HT Auto photo)
UPCOMING
BatteryCapacity Icon40 kWh Range Icon150 Km
₹ 8.25 - 10 Lakhs
Alert Me When Launched
Porsche 911 Gt3 (HT Auto photo)
Engine Icon3996.0 cc FuelType IconPetrol
₹ 2.50 Cr
Compare
View Offers
Mahindra S204 (HT Auto photo)
UPCOMING
₹ 12 Lakhs
Alert Me When Launched
Lexus Nx (HT Auto photo)
Engine Icon2494.0 cc FuelType IconMultiple
₹ 64.90 Lakhs
Compare
View Offers
Rolls-royce New Ghost (HT Auto photo)
UPCOMING
Engine Icon6750 cc FuelType IconPetrol
₹ 6.95 - 7.95 Cr
Alert Me When Launched
Mercedes-benz Amg E53 Cabriolet (HT Auto photo)
Engine Icon2999.0 cc FuelType IconPetrol
₹ 1.30 Cr
Compare

During this period, the share of diesel vehicles in the car segment will stabilise at around 5-7 per cent from 11 per cent, whereas the utility vehicle (UV) segment's share will gradually reduce to sub-40 per cent from 65 per cent, it added.

The entry-level, sub- 5 lakh price segment, has almost entirely shifted to petrol and CNG, as it does not make financial sense for an average car buyer to opt for a diesel vehicle, ICRA noted.

Also Read : Have diesel cars become 'white elephants' in current times of fuel price hikes?

One key challenge in this shift is the taxi segment that continues to account for a sizable share of overall diesel vehicle sales; and the government's initiative to push clean vehicles (CNG/LPG/hybrid) is yet to completely materialise, it added.

"With each passing day, the cost of owning a diesel PV is getting unviable. Retail diesel prices have been increased regularly in doses every month since January 2013 which has significantly narrowed down the retail price gap between petrol and diesel fuels," ICRA Vice-President and Co-Head (Corporate Ratings) Ashish Modani said.

Further, during the ongoing coronavirus pandemic, the increase in excise duties by the central government and value-added tax (VAT) by state governments to partly offset revenue losses further impacted fuel price gap, he added.

ICRA noted that with the coming of the BS 6 era, there has been an increase in upfront price differential of 50,000 to 70,000 between petrol and diesel vehicle. (PTI)
ICRA noted that with the coming of the BS 6 era, there has been an increase in upfront price differential of 50,000 to 70,000 between petrol and diesel vehicle. (PTI)

Consequently, due to narrowed down price differential, diesel has become costlier than petrol in Delhi; and in other states also, there has been a sharp correction in the gap between the two fuels, Modani said.

"Typically, petrol diesel mix has a high correlation with petrol diesel price gap (in rupee per litre) and lower the price gap, higher is the shift in customer preference, away from the diesel vehicle," he added.

With the coming of the BS 6 era, there has been an increase in upfront price differential of 50,000 to 70,000 between petrol and diesel vehicles, which is also helping in accelerating shift towards the former, ICRA noted.

Also Read : Diesel is dead. Long live hybrids: Porsche ushers in a new age

The share of diesel vehicles has already reduced to 29 per cent in 2019-20 from 58 per cent in 2012-13, and it will further reduce to about 15-18 per cent level in next three years, it added.

Globally, China, USA, the EU, Japan and India are top-five markets volume-wise. China and the US, the world's top two automobile markets, have a negligible share of diesel vehicle in their overall car sales.

On the other hand, diesel vehicles accounted for about 30 per cent and 29 per cent of the new PVs sold in the EU and the Indian market during 2019 and 2019-20, respectively, ICRA said.

First Published Date: 08 Jul 2020, 17:17 PM IST
NEXT ARTICLE BEGINS

Check Latest Offers

Please provide your details to get Personalized Offers

Choose city
+91 | Choose city
Choose city
Select a dealer

Want to get the best price for your existing car?

Powered by: Spinny Logo
By clicking "View Offers" you Agree to our Terms and Privacy Policy
Dear Name

Please verify your mobile number.

+91 | Choose city
Couldn't verify the OTP.
It's either expired or it's incorrect.